The typical new sport-utility vehicle rolling off a Tennessee assembly line contains 2,300 pounds of steel, but metal costs won’t surge quickly for automakers after the White House slapped higher tariffs Thursday on imported steel.

While imports account for about a third of the steel used in the United States, auto companies usually buffer against rapid price increases.

President Donald Trump ordered higher federal taxes on steel and aluminum imports under his America First initiative. The taxes, known as tariffs, would increase 25 percent on imported steel and 10 percent on imported aluminum.

Trump’s proposal had set off sharp debate between free trade advocates and U.S. metal industry executives who point out imports have roiled the nation’s steel mills and idled most aluminum smelters.

While the controversy carried into the White House, where the president’s free-trade minded senior economic advisor announced his resignation Tuesday, some industrial analysts contend Trump’s strategy aims to cause other steel-making nations to align with the United States and press China to reduce steel-making capacity.

“The actions we are taking today are not a matter of choice, they are a matter of necessity for our security,” Trump said Thursday during a ceremony at the White House. The order will take effect in 15 days.

Gov. Bill Haslam, left, speaks to U.S. Sen. Lamar Alexander, center, and Michael Horne, president/CEO of Volkswagen Group of America, while at the Hunter Museum of American Art in Chattanooga on July 15, 2014, as they gather for Volkswagen's announcement that it is investing $600 million to create 2,000 new jobs and expand the Chattanooga plant, where it will produce a new sport utility vehicle.(Photo: Dan Henry / Chattanooga Times Free Press / AP)

Auto state

The dispute is the most significant trade spat since Tennessee emerged in the 1980s as a key automotive state.

Although manufacturers employ only 12.5 million workers nationwide, a level last common in America in the late 1930s, factories power Tennessee’s $322 billion economy, particularly auto-parts plants and General Motors, Nissan and Volkswagen vehicle assembly lines in the middle and eastern regions. Auto plants employ about 50,000 of the state's 346,000 industrial workers.

Rising metal prices can lead to falling sales and factory layoffs if customers dial back business.

"If the price of steel goes up we can't absorb it. We have to pass it on or go out of business,’' said Stuart Speyer, president of Tennsco Corp., a 700-employee manufacturer of steel shelving in Dickson, Tennessee.

Speyer said he's concerned if he must raise prices, rivals abroad will export lower-priced shelves to the United States and take market share from Tennsco within a few months.

But it’s not certain vehicle prices would climb sharply in the near term.

A worker inspects a new 2015 aluminum-alloy body Ford F-150 truck at the company's Kansas City Assembly Plant on Friday, March 13, 2015, in Claycomo, Mo.(Photo: Charlie Riedel, Associated Press)

Metal market

“It might take more than a year for steel prices to filter through on the typical car,” said metal market analyst Karen McBeth of market researcher S&P Global in Washington. “What they pay for aluminum is going to change more quickly. Whether they will pass that change on to consumers, or can pass it on, I’m not sure about that.”

Automakers might absorb higher aluminum prices to maintain sales volume, McBeth said. Last year, 20 automakers in the United States sold 17.2 million new vehicles. In December, the typical new auto was purchased for $36,113, the highest average transaction price on record.

A workers inspects rolls of steel outside one of several building that makes up the new Big River Steel mill in Osceola, Ark. (Photo: Mark Weber/The Commercial Appeal)

New vehicles are packed with luxury items and electronic devices able to push the total price beyond $36,000. But automakers have pressed suppliers for cost cuts on more routine components such as shock absorbers to keep the transaction price from soaring. Automakers could employ the same strategy to cover a 10-percent uptick in aluminum taxes.

Aluminum came into wider use on vehicles as designers trimmed weight to help reach President Barack Obama’s goal of doubling the fuel economy in every automaker’s fleet to 54.5 miles per gallon on average by 2025.

Although the Trump administration intends to reduce these economy fuel rules, the typical vehicle now includes about 327 pounds of aluminum. Manufacturers tend to buy the metal on the global market in traditional fashion. They usually don’t use long-term supply contracts, McBeth said.

Because steel makes up 55 percent of the typical vehicle’s weight, and automakers are the steel industry’s largest customer, auto companies can negotiate favorable steel prices, often doing so as designers set out to engineer fresh models. Each fresh model usually stays in production for three to four years. The steel contracts commonly are in place for the same number of years.

President Donald Trump talks about an executive memorandum on investigation of steel imports that he was about to sign on Thursday in the Oval Office of the White House.(Photo: AP)

“They usually lock in the supply contract for the duration of the production cycle,” said Kristin Dziczek, director of the industry, labor and economics group at the Center for Automotive Research, a think tank in Ann Arbor, Mich.

This means the nation’s three top-selling vehicles likely fall under longer-term steel deals. Ford redesigned the best-selling F-150 pickup truck in 2015. General Motors is now freshening the Chevrolet Silverado pickup truck and Fiat Chrysler is doing the same with the Dodge Ram pickup truck. Production of this trio of pickups requires almost 3 million tons of steel each year.

“They probably already have locked in their metal prices,” Dziczek said, referring to the Ram and Silverado.

Push back

Officials in Canada, Mexico and the European Union, along with some members of the U.S. Congress, had urged the president to drop his tariff proposal. So had executives in a wide range of corporations that buy steel and aluminum.

On Tuesday, Trump senior economic advisor Gary Cohn, the former president of New York investment bank Goldman Sachs, announced he would resign, stirring speculation he strongly opposes Trump’s tariff stand.

Also weighing in was U.S. Treasury Steven Mnuchin, a former hedge fund manager and Goldman Sachs executive. Mnuchin said NAFTA trade partners Canada and Mexico would be exempt from the higher tariffs if the NAFTA trade treaty were renegotiated.

While some economic analysts warn the president’s move could lead other nations to put higher taxes on products imported from the United States, the White House called defense of U.S. steel and aluminum plants a necessity.

Tri-Arrows Aluminum's plant in Logan County supplies automotive manufacturers with rolled alloy for making major truck body components.(Photo: Courtesy of Ford Motor Co.)

China's role

In recent weeks as the administration telegraphed its tariff plans, commodity prices for hot rolled steel coils climbed about $23 to $800 per ton in the United States, the highet level since 2011, McBeth said.

U.S. steel producers lauded Trump’s initiative and assailed China’s continuous production. China built new mills that turned out to be unneeded as growth slowed after the 2008 global crash touched off by Wall Street's meltdown. Surplus steel in China has lowered the export price of hot rolled steel coils coming from China to $586 per ton currently from $900 per ton in 2008, McBeth said.

As global prices fell, U.S. steel mills lost business to imports, despite two decades of consolidation and automation that shrank the steel labor force to 147,000 workers from more than 600,000. By 2014, a U.S. steelworker laboring one hour could turn out 10.1 tons of steel on average, five times the 1980s' volume, reports the American Iron and Steel Institute, or AISI, a trade group for 21 companies.

“About one fourth of domestic steel capacity today is not being utilized,” AISI chief executive Thomas Gibson said in a statement released by the trade group. “This is fueled by the massive excess steel capacity in the world today..., which is more than eight times larger than the annual output of all U.S. steel producers, and driven by subsidies and other interventionist foreign government policies.”

Calming import-export conflicts is the role of the World Trade Organization, or WTO. However, McBeth points out many Americans contend the WTO proved unable to curb China’s export growth, leading to Trump’s tariff proposals.

“They haven’t had a lot of teeth with these investigations” into steel pricing, McBeth said about the WTO.

What's next?

Trade expert Alan Tonelson, formerly an economist with the U.S. Business & Industry Council, a group in Washington representing small manufacturers, said only the United States among major industrial nations lost significant steel output as China’s surplus pushed down global steel prices.

Canada, India, Mexico, Russia, South Africa, South Korea, Thailand and the United Arab Emirates especially cranked up steel exports to the United States in the last couple of years, Tonelson said.

These exports, he wrote in his blog RealityChek, “paint a compelling picture of the world’s leading steel producers complaining endlessly about the distortions created by China’s state-created global steel glut… but playing footsie with the Chinese behind the scenes at American steel producers’ expense. Which places a heavy burden of proof on opponents of President Trump’s response to explain how this situation bears any resemblance to free trade, and why broad-based tariffs aren’t an absolutely essential response.”

“We are concerned with the unintended consequences the proposals would have, particularly that it will lead to higher prices for steel and aluminum here in the United States, compared to the price paid by our global competitors," Matt Blunt, president of the American Automotive Policy Council, a trade group in Washington, said in a statement.